Will Apple's Growth Engines Grind To A Halt In A Downturn? No (AAPL)

Here's a scary scenario: Could Apple's (AAPL) main growth story -- its Mac computer business -- grind to a halt in a recession? Could its iPod line see shrinking sales next year? Could most of Apple's revenue growth next year come from this year's iPhone sales -- thanks to a creative accounting technique?

That's the doomsday forecast issued today by Citigroup analyst Richard Gardner, who whacked his estimates for Apple's fiscal '09 and '10, following downgrades from analysts at Morgan Stanley and RBC. Gardner's rationale is the same as his peers -- the cuts "reflect growing pressure on consumer spending from the housing downturn and related credit market turmoil." But he goes even further than the others in predicting doom and gloom for Steve Jobs:

He expects Apple to ship 10.2 million Macs next year -- estimated 2% year-over-year growth, down from his previous estimate of 11.4 million units, or 15% year-over-year growth. Why? Because Apple already commands a big portion of the $1,000+ laptop market, and he doesn't think Apple will play in the sub-$1,000 market. (He notes that his estimate is "conservative," but prefers "to err on the side of conservatism given the many unknowns heading into 2009.")

We could see how consumer spending might affect Apple's ability to keep growing laptop sales at the roughly 40%-60% y/y rate they've been growing at this year. But what about desktop sales, which are still about a third of Apple's PC sales -- and are also growing between 30%-50% y/y?

He expects Apple to ship 50 million iPods next year -- estimated 10% year-over-year decline, down from his previous estimate of 58.5 million iPods, or 6% year-over-year growth. Why? Most people who already want an iPod have one, and in a recession, they're not going to rush out to buy a new model, he says.

He expects Apple to sell 18.5 million iPhones next year, down from his previous estimate of 21.0 million.

Especially alarming: Gardner expects 70% of Apple's total revenue growth from fiscal '09 to come from deferred revenue from iPhones shipped in fiscal '08, and the rest to come from next year's iPhone sales. If that's true -- that most of Apple's sales growth is because of a clever accounting method -- the market will never buy it, and Gardner's $170 price target -- which he lowered from $287 -- is still way too high.

Obviously, we don't know how far the market meltdown will eventually go -- or how bad consumer spending will be next year. But it's one thing to predict a slowdown, and another to predict that people will just stop buying Macs altogether. For what it's worth, the market seems to think so, too: Apple shares closed up 8% today -- about 1.6x the NASDAQ -- after an 18% decline yesterday and a more than 30% decline this month.

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Will Apple's Growth Engines Grind To A Halt In A Downturn? No (AAPL)

Citigroup analyst Richard Gardner takes a red pen to his estimates for Apple -- slashing next year's Mac growth to nearly nothing, and predicting that Apple's iPod sales will decline. If he's right, then shares are going to crater. But we think AAPL owners can breathe easy.